The pandemic has boosted investor and consumer interest in open-air hospitality (including holiday parks, glamping and luxury tents), according to participants in a session at the Resort & Residential Hospitality Forum 2021.
In the past two years holiday park operators have increasingly attracted the attention of private equity investors. Last month French firm PAI Partners completed the acquisition of Europe’s leading holiday park operator European Camping Group (ECG, with brands such as Homair, Eurocamp, Al Fresco & Roan). Earlier this year Blackstone bought Bourne Leisure, whose portfolio includes caravan holiday parks operator Haven. And in 2020 KKR bought Dutch holiday parks firm Roompot in what was the year’s largest hospitality deal in Europe. What is the appeal of this niche segment for investors?
Much of this investor attention predates the pandemic but Covid-19 has made us all focus on fresh air and being outdoors, something that is likely to help the sector over the coming years.
Consumer demand
According to Adrien Lanotte, senior analyst at tourism and hospitality consultants MKG Consulting: “Open air concepts have proved to be well-suited to the needs of families and leisure guests both during and following Covid, as they are surrounded by nature, offering intimacy yet located in attractive tourism destinations and with similar amenities to traditional hotel resorts.”
In a study of over 400,000 client reviews on OTAs in key European leisure destinations (Algarve, Catalonia, Gelderland, Macedonia, Greece, Southern France), MKG Consulting has found that customer satisfaction in camping properties increased rapidly between 2018 and 2021 (from 34% active promoters in 2018 to 45 % in 2021) and overtook that of hotels, whose active promoters fell from 44% to 41 % over the same period.
Camping, glamping & luxury tents
The open-air hospitality sector can be divided into three segments, with budget campsite at the low end, a growing glamping segment, and luxury tents at the very high end.
Glamping has become a popular concept for consumers and investors alike in Northern Europe, particularly in France, the UK, the Netherlands and the Nordics. However, its growth is dampened by the prevalence of budget holiday parks in some key leisure markets, which remain associated with low-budget mass tourism. This is particularly true in the Iberian Peninsula, where innovative camping concepts are lacking.
“Whereas this lack of supply offers opportunities to local investors and resort operators, it also makes it difficult for them to showcase the high-quality standards of the latest concepts to business partners and officials such as municipalities and local governments,”, Lanotte said.
Middle East and African markets lead the way at the higher end of the segment: luxury tents are part of the travel experience for luxury customers seeking a one-of-a-kind desert or safari experience.
Development and operational KPIs
Developers looking to enter the market must be aware of how different KPIs are compared to traditional hospitality investments.
The cost of land needs to be balanced with lower revenue per square metre than traditional hospitality properties. Camping development may be priced by sellers according to nearby land prices for hotel construction, making it too high for camping units to be profitable.
Density (measure in sqm per bedplace/mobile home) should be considered together with the holiday park’s positioning and to its amenities. Glamping concepts offer a wide range of amenities, which makes applying a ratio different from a lower budget holiday park, both from an experience and an investment perspective.
When considering profitability, Lanotte said: “The prospective developers of glamping concepts should take into account the fact that their product life cycles and business models differ from those of traditional hospitality real estate classes. Mobile homes for example don’t have to be approached as pure CAPEX, as they can be revamped and may have an exit residual value on the second-hand market.”
The value of mobility
Open-air hospitality doesn’t have to be tied to a specific location, and this can open new opportunities to leisure destinations with available outdoors space.
“Open-air hospitality can often be mobile, whether it be containers that can be temporary set up for one-off events: music festivals, sport events… or anchored boats, which are increasingly popular on private rental platforms in resort destinations,” Lanotte said.
Motorhomes and RVs have also experienced a recent boom, which can generate ancillary revenues for hotels and resorts with usable space such as a car park. In addition to the space rental fee, the model can generate additional revenues from the provision of access to basic utilities as well as F&B and leisure amenities.
The pandemic-induced interest in open-air hospitality has the opportunity to open the door to a range of innovative hospitality concepts, at a time when the leisure market is itself attracting much attention from investors and operators alike.